A federal appeals court in the US has upheld the right of a copyright holder to distribute software under a free or open-source licence while preventing such code being used commercially without following the licensing conditions.

Wednesday's judgement came in the case of Robert Jacobsen vs Matthew Katzer and Kamind Associates. Jacobsen manages an open-source project called Java Model Railroad Interface (JMRI), which creates software for model-railroad enthusiasts. The software in question, DecoderPro, programs the decoder chips that control model trains.

Katzer and Kamind, trading as KAM Industries, have a rival product called Decoder Commander. According to Jacobsen, Decoder Commander uses portions of code from DecoderPro, but without attribution. DecoderPro's open-source Artistic License demands attribution in any derived product, along with JMRI copyright notices, references to a 'Copying' file, an identification of the SourceForge project or JMRI as the source, and a description of modifications that have been made to the original source code and file names. None of these are present in Decoder Commander.

After Jacobsen sued Katzer and Kamind for copyright infringement, the District Court of Northern California found in favour of Katzer and Kamind, arguing that violating the terms of the open-source licence did not constitute copyright infringement. That ruling was overturned on Wednesday by Judge Jeffrey S White of the US Court of Appeals for the Federal Circuit.

In his ruling, White said that "copyright holders who engage in open-source licensing have the right to control the modification and distribution of copyrighted material".

"Copyright licences are designed to support the right to exclude; money damages alone do not support or enforce that right," said White. "The choice to exact consideration in the form of compliance with the open-source requirements of disclosure and explanation of changes, rather than as a dollar-denominated fee, is entitled to no less legal recognition. Indeed, because a calculation of damages is inherently speculative, these types of licence restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief."

Stanford Law School's Professor Lawrence Lessig — a long-standing advocate of software freedom and a founder of the Creative Commons movement — wrote on his blog that White's judgement was "huge" and "a very important victory" for the legal equality between open-source licences and traditional copyright.

"The court has held that free licences such as the [Creative Commons, or CC] licences set conditions (rather than covenants) on the use of copyrighted work," wrote Lessig. "When you violate the condition, the licence disappears, meaning you're simply a copyright infringer. This is the theory of the GPL [General Public License] and all CC licences. Put precisely, whether or not they are also contracts, they are copyright licences which expire if you fail to abide by the terms of the licence."

Pamela Jones, author of the Groklaw blog, which covers the legal side of technology, wrote that the verdict could have implications for enforcing the GNU General Public License, probably the best-known 'copyleft' licence.

"As you've seen in the SCO saga, copyright law has teeth — including injunctive relief — that make policing infringements easier," wrote Jones. "The GPL is another example of a licence that depends on copyright law for enforcement, because it's a copyright licence, not a contract. Although this model-train case is about a different licence, because the US is a legal system based in part on case law, every decision matters."

White's judgement effectively returned the case to the District Court of Northern California. According to the JMRI website, that court must "decide on a remaining question before issuing the injunction [against Katzer and Kamind]". The nature of that question is not yet clear.